In other news, BlackRock has new iShares custodians, RJO fills a key European post, STP acquires Tower, and NeoXam expands a key relationship.
Bill Would Ease the Way to SOFR
Rep. Brad Sherman
In a rare act of bipartisanship, the U.S. House of Representatives overwhelmingly passed legislation intended to ease the London Interbank Offered Rate (LIBOR) transition for “markets, investors, and consumers” with what’s known as “tough legacy contracts” — incumbent agreements that will end without a designated reference rate.
The use of LIBOR for new contracts ends on Dec. 31, 2021, and the reference rate will no longer be published after June 30, 2023. Agreements set up before the LIBOR manipulation scandals have no fallback reference rate other than LIBOR. The bill is intended to address that looming problem.
The bill will provide a legal basis for the use of the Federal Reserve’s alternative reference rate — the Secured Overnight Financing Rate (SOFR).
The enactment of the Adjustable Interest Rate (LIBOR) Act “will help ensure the discontinuation of LIBOR does not inflict harm on avoids significant systemic disruptions to our financial system. The bill passed the House by a vote of 415 to 9,” according to an official statement from its sponsor Rep. Brad Sherman (D-CA-30).
“Failure to transition away from LIBOR will leave parties unable to calculate the interest due on an estimated $16 trillion of debt instruments, a systemic risk to the economy,” says Sherman, chair of the House Financial Services Subcommittee on Capital Markets and Investor Protection.
Major financial services regulators support the bill and it has the support of the securities industry trade group SIFMA.
“The legislation would provide four key benefits: (1) certainty of outcomes; (2) fairness and equality of outcomes; (3) avoidance of years of paralyzing litigation; and (4) preservation of liquidity and market resilience,” according to a prepare statement from Kenneth E. Bentsen, Jr., SIFMA president and CEO.
The bill moves onto the U.S. Senate for review and, then if passed, to President Biden for final approval.
— EMG
BlackRock Taps BNY Mellon, Citi & JPMorgan for iShares Custody
BlackRock will be using the post-trade services of BNY Mellon, Citi, and JPMorgan for its iShares exchanged traded funds (ETFs) – expanding its list of providers beyond State Street, which has been serving as the sole iShares custodian, officials say.
“Each firm will provide custodial, fund administration, fund accounting, and transfer agency services to a subset of U.S.-listed iShares ETFs,” according to BlackRock officials.
“The transition of any U.S. iShares ETF assets to the new providers is expected to commence in the second half of 2022 and projected to take 18 months to complete. The RFP and due diligence process for iShares’ Ireland-domiciled ETFs is on-going and the outcome will be announced at a later date,” according to BlackRock.
“As we anticipate decades of growth ahead for iShares and the industry, these changes reinforce and diversify our operational foundation so that we can deliver more ETF exposures at greater scale and with the high standards that our clients expect,” says Salim Ramji, global head of iShares & Index Investing at BlackRock, in a prepared statement.
iShares includes a line-up of approximately 900 ETFs and $3.04 trillion in assets under management as of September 30, 2021, officials say.
BlackRock manages the iShares portfolios and the related risk.
— EMG
RJO Names an EMEA MD for its U.K. Affiliate
Chicago-based R.J. O’Brien & Associates (RJO), which characterizes itself as the oldest and largest independent futures brokerage and clearing firm in the U.S., reports that Mark Phelps, group CEO of G.H. Financials, will “soon assume the role of Managing Director, EMEA for its London-based affiliate, R.J. O’Brien Limited (RJO Limited).”
Phelps is a nearly 25-year veteran of the futures markets, both in Europe and around the world, the firm says in a statement. He will be based in London and report to RJO Chairman and CEO Gerald Corcoran.
Phelps was group CEO of G.H. Financials, a London-based exchange-traded-derivatives clearing firm, beginning in April 2018.
He began his career in 1997 at the London International Financial Futures and Options Exchange.
R.J. O’Brien & Associates was founded in 1914.
EMEA is an acronym for the Europe, Middle East, and Africa region.
— L.Ch
STP Investment Services Acquires Tower Fund Services
STP Investment Services, which characterizes itself as an end-to-end investment-operations service provider that supports more than $340 billion in total assets, has acquired Tower Fund Services, a third-party fund administrator.
The acquisition “substantially increases STP’s alternative fund administration value proposition for its clients, while simultaneously delivering Tower clients an enhanced service experience and future-ready financial technology,” the companies say in a statement.
Tower “provides an outsourced solution for alternative investment managers and family offices, offering fund administration to private equity funds, cryptocurrency funds, hedge funds, venture capital, fund of funds, real estate, and direct lending funds,” according to the statement.
Tower Fund Services is based in Oceanport, New Jersey.
STP reports more than 225 employees around the world. — L.Ch
NeoXam & Refinitiv Expand Partnership
NeoXam, a financial software company with headquarters in Paris, France, declares that it has “strengthened its ties with Refinitiv to provide market participants with greater choice and simplification over their data.”
Refinitiv is a business of the London Stock Exchange Group (LSEG) and characterizes itself as “one of the world’s largest providers of financial markets data and infrastructure.”
Refinitiv will provide “reference, pricing, ESG, regulatory and tax data sets and more,” according to the firms’ statement, while NeoXam will provide “quality control through its NeoXam DataHub platform.”
The companies intend to offer a method for financial institutions to “seamlessly connect to key data sources without putting additional strain on IT infrastructure,” per the statement. — L.Ch
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